"80% of traders lose money."

Discussion in 'Professional Trading' started by prototrance, Oct 15, 2008.

  1. How on Earth was this number determined? Is this a statistic representing traders over a certain time period (1975-1996, for example)? Is it update every year? Who determined this? Who qualifies as a "trader" for this statistic? What do they mean "lose money"? As in they were wrong once or twice and they lost a couple of bucks or as in they lost everything? There are so many questions regarding this stat, and it seems to be taken as gospel. It'd be one thing if we were discussing some quantitatively simple such as people's eye color (60% of people have blue eyes, for instance.)

    It's like an insurance company calculating its customers' policies only on the assumption that "100% of people die." Our premiums would be pretty high with just that pretense. Instead insurances companies break down the odds of you dying based on your age, job, race, location, gender, hobbies, etc. They understand that circumstances change and that personal situations are different - that's why they don't use a one-size-fits-all statistic across the board. There are plenty of variables to consider.

    "95% of people get answers on exams wrong." How's that for a stat, huh?! Why bother even going to school if you're going to get answers wrong?

    Coming from a hard science background, little "factiod gems" such as this one piss me off.

    Anywho, discuss.
  2. They call it conventional wisdom. Anybody that wants to venture beyond the boundaries of CW has to do it on their own dime and time.

    There were some statistics that came out of Hong Kong wherein they found that 20% of frequent traders were quite profitable and 80% were struggling, something like that, I can't cite a source either...
  3. The 80% number probably comes from the old 80/20 principle.

    For futures trading the usual statistic is that 90% of the traders lose money and for options it is 95%.

    You may gain some insight by reading "The Futures Game: Who Wins, Who Loses, & Why" by Richard J. Teweles.
  4. where did you get this number?out of a hat?

    its more like 95%.then 95% of the 5% who make money in the short run end up losing over time.

    so, you still interested in Trading?
  5. A little old but still worth a read.
  6. Supernaut, I got the number from the same hat that you got your numbers out of. And by "same hat" I mean "your ass". As to everyone else with something constructive, thanks for the reply. No, I'm not new to trading or looking to get started in trading. I trade and I trade quite well, thank you very much. People that know I trade throw that number in my face all of the time as if their conventional wisdom is going to somehow come true because they believe it.

    Yes, I realize people lose money trading. The stat is pretty general, however. It doesn't seem to quantify the people's experience (there are some really, really bad investors and traders out there). Does that number include folks that considered themselves "traders" during the tech bubble in the late 90's and then lost it all because all they did was put there money in a tech stock and hoped it would come back up when it crashed. While they would consider themselves "traders" (sex appeal, maybe?) I don't think other traders would.

    I've read about the Hong Kong experiment, but I was under the impression that it was conducted about a decade and a half ago. And once again, in Hong Kong. It's like me applying mortality rates of people in living in Ethiopia in 1985 to people living in present day rural Minnesota.

    Once again, thanks for the replies so far. Continue with the discussion.
  7. are we talking dark blue, light blue or just blue??? :D
  8. "Most of studies posted here do not have a viable dataset, in my opinion.

    This is a better study of the Taiwanese market, that used entire exchange data on *every* market participant, and *all* their transactions from 1995 to 1999 (or so they told us, hehe). Sound like a solid dataset, in my opinion.

    http://faculty.haas.berkeley.edu/odean/papers/Day Traders/Day Trade 040330.pdf

    And some more, from a different angle:
    http://faculty.haas.berkeley.edu/odean/papers/Taiwan Performance "


    Besides that , some brokers confirmed in the above thread that 99 % of day traders lose sooner or later
  9. Azure? :p
  10. What is meant by losing money? It's like people getting answers wrong on an exam. Everyone gets answers incorrect on exams, but that doesn't mean that everyone gets every single answer incorrect or fails it.

    I'll be sure to look at the links, thanks!

    #10     Oct 16, 2008